ProQuest Text only interface « Back to Document View

Databases selected:  ProQuest Newspapers

As TV Networks Use Web, Affiliates Seek Piece of the Action
Brooks BarnesWall Street Journal(Eastern edition). New York, N.Y.: Feb 1, 2006. pg. B.1
Author(s):Brooks Barnes
Publication title:Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 1, 2006.  pg. B.1
Source type:Newspaper
ISSN/ISBN:00999660
ProQuest document ID:979369371
Text Word Count1088
Document URL:http://proquest.umi.com/pqdweb?did=979369371&sid=1&Fmt=3&cli entId=45984&RQT=309&VName=PQD
Abstract (Document Summary)

On one side are big networks such as Walt Disney Co.'s ABC and CBS Corp.'s CBS, which are aggressively courting new business opportunities in digital media, cutting deals to distribute hit programs in cyberspace. Confronting the giants are local television stations angry that their affiliated networks aren't giving them a bigger piece -- or in some cases any piece -- of the action.

In a high-profile example, one of the most powerful CBS affiliates says it is in early discussions with the network to provide hit CBS shows via the station's Web site. The affiliate, Capitol Broadcasting Co.'s WRAL in Raleigh, N.C., wants to stream hit CBS shows live on the WRAL Web site and then offer them on demand afterward. Both versions would include commercials, with the live stream offered free, and on- demand downloads sold for a small fee.

WRAL is one of the biggest stations in the nation that air CBS programming but isn't owned and operated by CBS itself. In CBS's case, there are 191 such affiliates, covering about 60% of the country. The twist that WRAL hopes will make its plan palatable to CBS is its use of technology developed by Decisionmark Corp. that allows stations to limit the geographic boundaries of their Web sites; only those living within reach of a station's old-fashioned signal would be able to view or download shows through their Web sites.

Full Text (1088   words)
Copyright (c) 2006, Dow Jones & Company Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

A CIVIL WAR is simmering beneath the surface of the television business.

On one side are big networks such as Walt Disney Co.'s ABC and CBS Corp.'s CBS, which are aggressively courting new business opportunities in digital media, cutting deals to distribute hit programs in cyberspace. Confronting the giants are local television stations angry that their affiliated networks aren't giving them a bigger piece -- or in some cases any piece -- of the action.

So far, affiliates have mostly engaged in saber rattling. But that's starting to change, with stations demanding that networks include them as partners in digital endeavors. "We aren't going to be accidentally -- or purposely -- left out of the equation," says David Rehr, president of the National Association of Broadcasters.

In a high-profile example, one of the most powerful CBS affiliates says it is in early discussions with the network to provide hit CBS shows via the station's Web site. The affiliate, Capitol Broadcasting Co.'s WRAL in Raleigh, N.C., wants to stream hit CBS shows live on the WRAL Web site and then offer them on demand afterward. Both versions would include commercials, with the live stream offered free, and on- demand downloads sold for a small fee.

WRAL is one of the biggest stations in the nation that air CBS programming but isn't owned and operated by CBS itself. In CBS's case, there are 191 such affiliates, covering about 60% of the country. The twist that WRAL hopes will make its plan palatable to CBS is its use of technology developed by Decisionmark Corp. that allows stations to limit the geographic boundaries of their Web sites; only those living within reach of a station's old-fashioned signal would be able to view or download shows through their Web sites.

CBS declined to comment.

Stations such as WRAL are upset because of the flood of deals their affiliated networks have negotiated in recent months to distribute new episodes of hit shows online. Stations, which for decades have enjoyed exclusive access to new episodes, worry that making shows available on Apple Computer Inc.'s iTunes and on Google Inc.'s new video service will erode ratings, and thus ad rates. Owners of local stations also see the distribution of shows online as a potentially lucrative business and want to be part of it.

Most of the nation's TV stations are owned by independent companies that contract with the national networks, much as car dealerships are linked to auto makers. Networks need affiliates to reach the biggest possible audience and command higher rates from advertisers. Affiliates need strong network programming to help their own local ratings.

The two sides have jostled for years over how much control networks have over affiliates. In the early days of TV, the fledgling networks were the weaker partner, enticing station owners to sign on with them. But today many affiliates say they're getting marginalized as a result of networks being able to own dozens of stations themselves due to federal deregulation.

Stations were more willing to put up with diminishing power while they were still cash cows faced with little competition. But the station business is increasingly under attack. TV-station advertising dropped 8% in the first nine months of 2005 to $12 billion, according to the Television Bureau of Advertising. The outlook doesn't look much better: The troubled auto manufacturers are local TV's biggest customer, accounting for about 29% of $16 billion spent on local advertising each year.

Among the other problems facing stations: Beefed-up on-demand offerings from big cable operators, the proliferation of sports events on satellite and cable and the shift of local news and weather services online.

The big TV companies have taken different approaches to incorporating affiliates into their digital business plans -- largely because each has different contractual obligations. Some, such as ABC and General Electric Co.'s NBC, have cut deals with digital-media companies such as Apple without notifying affiliates; ABC and NBC say their contracts provide them that right. NBC also says it is working with affiliates in other ways, including Weather Plus, a series of all-digital local weather channels

News Corp.'s Fox, in contrast, has been restricted from certain digital endeavors through a complex agreement with affiliates over rights to air National Football League games. The network said yesterday that it is in advanced discussions with affiliates on a deal to share revenue from initiatives such as video on demand. CBS is already sharing revenue from some of its digital ventures with affiliates.

Overall, however, the networks see the bulk of revenue from these digital ventures as theirs -- primarily as an antidote for their escalating production costs. Stations, networks say, aren't the ones financing dramas that now cost an average of $2 million an hour to produce. Networks also say making episodes available on the Web -- in some cases just hours after they air -- actually helps ratings.

"The smart stations will embrace this and the shortsighted ones will say we want a piece of what you're doing," says Stephen McPherson, ABC's president of entertainment.

Even so, affiliate rancor has grown to a point at which ABC has recently shown a willingness to form partnerships with affiliates on future deals. One option under discussion: offering shows on demand via station Web sites. Indeed, senior ABC executives recently met with Decisionmark officials to explore a WRAL-style arrangement with ABC affiliates.

Networks say stations are approaching them with a compelling argument when it comes to on-demand partnerships: Collaborate with us to offer shows on demand, and we'll give the effort heavy on-air marketing and promotion.

"We'll explain it over and over again on our local newscasts and we'll promote it on air," says Craig Jahelka, general manager of ABC- affiliate KERO 23 in Bakersfield, Calif.

Jim Goodmon, president of Capitol Broadcasting, says WRAL will kick off its on-demand service today with local news and entertainment programming. The station's goal is to boost advertising sales with the initiative while meeting viewer demands that shows are available online, Mr. Goodmon says. WRAL says a timeline for CBS participation hasn't been set.

---

Channel Changers

Local stations once had exclusive rights to broadcast shows. Some examples
of content offered by competitors:

-- iPod (iTunes sells 'Lost' and 'The Office' episodes)

-- Web sites (Google Video sells CBS's 'Survivor')

-- Mobile phones (Verizon's Vcast offers NBC News clips and 'CSI: Miami' highlights)

-- Video on demand (Comcast offers 'Amazing Race')

-- Cable networks (Bravo shows 'West Wing' reruns)

-- DVD (Full seasons of 'Alias' available)

Source: WSJ research


Copyright © 2006 ProQuest Information and Learning Company. All rights reserved. Terms and Conditions
Text-only interface

From ProQuest Company